Are rising house prices affecting Ireland’s competitiveness?

The findings of the National Competitive Council’s study on the affordability of Irish housing, released today, shows the need for Ireland to get building once more.

The report revealed that high rents and house prices were impacting Ireland’s economic competitiveness.

For many years now supply has been an issue, particularly in the key cities and urban areas. However, very little has been done about it by a Government that has too often been distracted by what are deemed more pressing matters.

However, in the wake of the recent Brexit result in the UK, the need for more accommodation is more vital than ever if the IDA are to attract more Foreign Direct Investment here from companies wishing to have a European base in an English speaking country.

In recent years companies such as PayPal have bemoaned the lack of accommodation available for their staff and if workers can neither find nor afford it then companies will look at options other than Ireland.

The study by the National Competitiveness Council noted that a well-functioning market was “crucial” to the economy here. However, of the 12 cities studied only Amsterdam and London had higher mortgage affordability scores than Dublin. The higher the score, the less affordable property is to buy.

The issue isn’t much better with regard to renting, with only three of the 12 cities dearer to rent in than Dublin.

Both house prices and rental costs are continuing to grow due to demand but the supply is not there and this means this is a problem that will only worsen unless action is taken.

NCC chairman Professor Peter Clinch said the main challenge at the moment was to deliver enough housing supply to meet demand at a price level that is affordable, accessible and sustainable. But he warned that, while there was an immediate pressure for intervention in the residential property market, there were no obvious quick fixes. “Therefore, it is essential a long-term, cross-government approach be taken to ensuring a sustainable housing market,” he said.

The report says that in order to encourage increased supply, prices need to exceed costs. But it says that, as a result of the Central Bank mortgage rules, prices are, in effect, capped relative to incomes. “Therefore, there is a need to address the other side of the equation and reduce development and construction costs relative to income and prices,” it says.

Chambers Ireland this morning described the report as “worrying” particularly given the post-Brexit opportunities the country would have.

He said: “There are new opportunities for Ireland to attract additional FDI given Britain’s decision to leave the EU, but insufficient accommodation options for employees and their families will make Ireland less attractive for investment. Ireland is most certainly open for business, but rapidly increasing the supply of housing of all types, social, private, and ‘build to rent’ accommodation, is now vital to help address housing affordability issues and to ensure that our cities can continue to attract and retain Foreign Direct Investment. We expect that the forthcoming Action Plan for Housing will provide a blueprint for the concerted action necessary to increase the supply of housing in our cities, but it will need swift implementation.”

Let us know your view on the subject.

Is the Government doing enough to encourage more building?

Would you blame a multinational for being put off coming here because of the housing situation?